28 September 2023

Recovery – Closure of financial year, or bank holidays, cannot justify recovery on the day next to the date of unfavourable order

The Patna High Court has held that imminent bank holidays of 2 or 3 days and the close of the financial year cannot be the valid reasons to justify an expedient recovery under the proviso to Section 78 of the CGST Act, 2017.

The Court expressed deep anguish and dissatisfaction in the said reasons as recorded, and kept hidden, by the officers in the files while initiating recovery.

The High Court in Sita Pandey v. State of Bihar [Civil Writ Jurisdiction Case No. 5407 of 20] also found it unclear as to how the interest of the revenue would suffer if the recovery is kept in abeyance for three months or at least a notice is issued to the assessee before the recovery is effectuated from the banks, behind the back of the assessee.

According to the High Court, there is a requirement of notice, if not prior to the recording of reasons; at least intimation of the reasons which motivates the proper officer to recover the amounts due, considering such recovery to be expedient with clear specification of the period less than a period of three months, within which the amounts are to be paid.

The dispute involved recovering the assessed tax due, just after a day of dismissal of the appeal when there was a further appeal provided in the statute and the Tribunal before which such an appeal was to be filed was not constituted.

The Court also relied on Notifications issued for extending the time period for filing appeal before the Tribunal, as the same was yet to be constituted.

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